CPS Energy CEO: distributed generation challenges are solvable

By on June 19, 2014

The rapid growth of rooftop solar has presented new opportunities and benefits for municipally owned utilities, but adding more distributed generation to the grid will also have broad implications for the electric power industry, including revenue challenges.

That’s the message public utility leaders heard Tuesday from CPS Energy President & CEO Doyle Beneby at the American Public Power Association conference in Denver.

It’s an incredibly complex issue, he said, as utilities struggle to balance encouraging continued distributed solar development without unduly burdening other customer classes or adversely impacting fiscal stability.

“You have to factor in the will and tone of your community,” he said from the stage of the Sheraton Hotel, where he was joined by leaders from the Salt River Project in Phoenix, the city of St. George, Utah, and the Solar Electric Power Association to discuss how utilities are responding to these challenges at a time where the growth of solar has been off the charts.

The panel discussion was moderated by Sue Kelly, President & CEO of the American Public Power Association in Washington.

More solar came on the grid last year in America – 4.2 GW – than all that had been installed up through 2011, which was 2.3 GW, according to the Solar Electric Power Association.  Such growth nationwide, particularly in the Southwest, can be attributed to reduced solar costs, rebates and additional power purchase agreements and lease options for customers looking for new choices.

Customers have a choice with solar, Beneby said, and they feel good about that. The growing output from rooftop solar in San Antonio is also benefiting the utility, he said, during peak demand and helping to reduce CPS Energy’s carbon footprint. But the rapid growth poses challenges as existing plants could be underutilized, causing stranded investments for the utility.

Salt River Project General Manager Mark Bonsall and Phillip Solomon, energy services director for the city of St. George, acknowledged that distributed generation creates a new business model with a new class of customers. The changes are something utilities want to embrace and do well, they said, but the unrecovered costs effectively become a subsidy paid for by non-solar customers.

Beneby agreed with Bonsall and Solomon that one of the most important steps when addressing the growth of rooftop solar is making sure to get stakeholders involved in discussions from the very beginning. In San Antonio, Beneby said, that has meant a discussion that includes numbers, politics and ideology – difficult issues to get different stakeholders to agree on.

Looking at the continued growth of distributed rooftop solar in San Antonio, Beneby noted that because solar is integrated into CPS Energy’s demand response programs, the utility might soon be able to aggregate solar and demand response and bid them into the day ahead market, monetizing some of this renewable resource by selling it to the state’s grid operator.

That could help mitigate stranded assets, Beneby said. “We are finding that in a few years we will be able to cycle some power plants less and in sum total, we will have tangible benefits from solar distributed generation.”

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